SEC 280G

Question 1

Who is subject to 280G

Answer 1

• Disqualified individuals can receive parachute payments when there is a change in control

Question 2

Disqualified individuals

Answer 2

• A DI is anyone who (a) is an employee or independent contractor who performs personal services for a corporation and (b) is an officer, 1% shareholder or highly compensated individual.
• The excise tax and loss of deduction is imposed on any “excess parachute payments.” The excess parachute payments are determined based on the value of the DI’s parachute payments, less 100% of the DI’s Base Amount

Question 3

Golden Parachute excise tax

Answer 3

When a DI receives payments exceeding the “safe harbor” limit, the Golden Parachute rules impose a 20% excise tax on the DI and disallow the related compensation deduction to the corporation

Question 4

Are all parachute payments subject to the Golden Parachute excise tax

Answer 4

Parachute payments will be impacted by the Golden Parachute rules if they exceed a “safe harbor” limit, which is equal to 300% of the DI’s Base Amount

• The excise tax and loss of deduction is imposed on any “excess parachute payments.” The excess parachute payments are determined based on the value of the DI’s parachute payments, less 100% of the DI’s Base Amount.